5 predictions for the rental market
What do past economic recessions (and depressions) tell us about where the rental market is going?
Photo by Jan Gottweiss on Unsplash
Many landlords are wondering what impact the COVID-19 pandemic will have on their investment properties. The market is full of talk about tenants not paying rent and not being able to move during the lockdown, but the big question on everyone’s minds is what to expect after lockdown in what most people expect to be the worst economic period since the Great Depression.
5 predictions for a pandemic stricken rental market:
1. What we know for sure is that people need somewhere to live
Housing is a basic need and a true essential for everyone in the economy. After food, shelter comes next on the hierarchy of human needs. For this reason, the fundamental demand for housing can never be eliminated, it’s only a question of pricing. Even though it’s likely that there may be fewer people moving for the next couple of months, we believe that once the worst part of the pandemic is over, people will start moving again.
2. For some, this is no time to be buying
Buying a property is a long term decision and often the biggest investment decision of a buyer’s life. The uncertainty created by the virus has resulted in homeowners not being able to have confidence in the prospects of the long term housing market. While the picture slowly becomes more clear, many potential homeowners will decide to continue to rent. Renting gives people more flexibility during these troubled times and a way to sit on the fence before making any major life-changing decisions. This may also provide an opportunity for landlords who are looking to take advantage of the shift towards renting.
3. Remote working is here to stay
There are more people working from home than any other time that any of us can remember. For a few of us, this has been easy to manage as we have the right setup at home but for many people, they simply do not have the space in their current homes to work quietly without being distracted by children or their partners. This will lead to many tenants looking for larger homes that give them the space that they need to create a more sustainable live-work environment for themselves and their families.
4. Airbnb stock is now flooding the long term market
South Africa is reported to have over 50,000 Airbnb hosts. The travel market is now in a standstill position with travel bans expected for the foreseeable future. The hosts will naturally look for other ways to generate revenue from these properties which is leading them back to long term rentals. This will create an oversupply in the market which will put downward pressure on prices in the rental market. The market being oversupplied means that tenants can now find cheaper deals so they may see this an opportunistic time to move.
5. Relocating to make ends meet
Many tenants have either been retrenched or have had their salaries reduced. Housing represents their biggest cost so it’s the first place they would look to create some household savings. They may also not need to live as close to work as they used to, which could mean tenants start to look at living further away from the middle of the city where rentals are often cheaper on bigger pieces of land.
We hope that this gives you some good sense of where the market is going. Of course, there are other trends that will also rise from the pandemic but we see this as a starting point of a conversation with the rental community and we would really like to get your feedback on our predictions.
Comment below and we will be sure to consider your thoughts as we release our next round of predictions next month.